(and what high-performing finance teams do differently)
Days sales outstanding (DSO) is increasing across many sectors, even where revenues are stable or growing. In 2026, the constraint on cash flow is more operational than commercial. The problem is becoming more about whether organisations can collect efficiently. Recent global research shows accounts receivable is now the largest component of excess working capital with a material performance gap between top and median companies driven largely by process effectiveness. For CFOs and finance leaders, accounts receivable now sits at the centre of liquidity management. Its performance directly determines how quickly reported revenue turns into usable cash and how much external funding the business must rely on.
Why AR is under pressure in 2026
Payment cycles are lengthening under a combination of structural pressures. Customers are pushing for longer terms as a condition of continued trade, while elevated interest rates increase the cost of waiting for cash. Ongoing supply chain disruption is encouraging companies to preserve liquidity, and more complex transactions are producing a higher volume of disputes. At the same time, lenders and boards are examining working capital performance far more closely than in previous years. Across major economies, DSO has trended upward, tying up larger amounts of capital in receivables, with Europe experiencing disproportionate pressure. UK businesses report longer collection periods even where order books remain healthy, as delayed invoicing, unresolved queries and extended terms widen the gap between recorded revenue and cash receipts. Total working capital reached its highest level since the financial crisis in 2025, showing that large amounts of cash remain tied up in day-to-day operations. Revenue growth alone therefore provides little assurance of near-term cash availability.
The most common AR process bottlenecks
- Manual collections and fragmented follow-up
Many AR teams depend on spreadsheets, fragmented email trails and manual reminders. But the problem is that they rely heavily on individual effort and informal coordination, which makes consistency difficult to maintain as portfolios grow.
Typical failure points include:
- follow-ups happen at irregular intervals across customers
- higher-risk accounts aren’t consistently prioritised
- it’s hard to see what actions have been taken or when
- progress depends heavily on individual staff members
- escalation happens late or not at all
High-performing organisations take a different approach, using predictive prioritisation and structured workflow automation to direct effort toward accounts where intervention is most likely to accelerate cash and reduce risk.
Slow dispute resolution
Disputes are one of the largest hidden drivers of DSO.
Typical failure points include:
- no single dispute owner
- poor documentation of issues
- cross-functional delays (sales, operations, logistics)
- lack of time limits or escalation triggers
- incomplete root-cause analysis
Unresolved disputes stall invoices indefinitely. From a working-capital perspective, this is equivalent to extending credit terms without approval. Modern AR approaches treat disputes as structured workflows rather than ad-hoc conversations with defined evidence requirements and resolution deadlines.
Billing errors and late invoicing
Cash collection starts with invoice accuracy and timeliness. Common problems include:
- incorrect pricing or quantities
- missing purchase order references
- non-compliant formats
- delayed invoice issuance
- manual data entry errors
Even minor discrepancies can trigger disputes or payment holds. In 2026, finance teams are increasingly expected to provide ‘first-time right’ billing, as AR is now viewed as a customer experience function as much as a back-office activity.
Lack of real-time visibility
Traditional AR reporting is often retrospective and batch based. By the time issues appear in reports, recovery opportunities might already be lost.
Finance leaders now require near-real-time insight into:
- overdue exposures
- payment behaviour trends
- dispute pipelines
- customer risk indicators
- forecasted cash receipts
Limited visibility forces decisions to follow events instead of anticipating them. Companies that have implemented AI-driven working capital systems report stronger cash transparency and operational effectiveness with widespread use of AI for forecasting and process automation.
Unclear escalation and ownership
Perhaps the most damaging bottleneck is organisational ambiguity.
Symptoms include:
- no clear owner for major overdue accounts
- collections deferred to sales teams without authority
- risk decisions made informally
- escalation triggered only after severe delays
- diffusion of accountability
Large organisations frequently ‘leak value’ at hand-offs between teams. Without explicit ownership, critical actions fall through the gaps. High-performing companies establish named accountability for significant exposures and predefined escalation pathways.
Siloed AR, credit and sales functions
Many organisations treat credit management, collections and customer management as separate domains.
This fragmentation creates:
- conflicting priorities (revenue vs risk vs cash)
- inconsistent messaging to customers
- slow decision-making
- poor coordination during disputes
- lack of end-to-end visibility
Modern working-capital leaders increasingly operate cross-functional revenue-to-cash processes rather than isolated AR departments.
What high-performing finance teams are doing differently
Top performers focus less on chasing payments and more on designing systems that prevent delays.
Key practices include:
- Structured, automated workflows:
Collections, disputes and escalations follow defined processes with service levels and audit trails. - Predictive prioritisation:
Resources are directed toward accounts where intervention materially accelerates cash. - Live data integration:
Payment information, customer activity and credit exposure are continuously updated. - Clear accountability:
Major exposures have named owners empowered to act. - Customer-centric AR design:
Billing clarity and payment convenience are treated as drivers of retention and risk reduction. - Technology as enabler but not a solution:
Research consistently shows technology improves outcomes only when paired with process redesign and adoption.
Strategic implication for CFOs
Working capital can provide a durable competitive advantage. Organisations that convert revenue into cash quickly retain the capacity to invest, absorb shocks and engage counterparties from a position of financial strength. Inefficient receivables processes gradually weaken resilience by delaying inflows and increasing reliance on external funding. Even small performance gains can release significant liquidity. A reduction in DSO of only a few days may free substantial cash for large enterprises.
More from Baker Ing
Rising DSO often reflects internal friction rather than deteriorating customer quality. Cash becomes trapped when collections depend on manual activity, accountability is diffused and disputes linger unresolved. In these circumstances, even reliable customers pay late because the organisation makes it easy for them to do so. Performance gaps in 2026 are largely explained by execution. Top-quartile teams treat accounts receivable as a continuous operating discipline supported by live information, clear decision rights and coordinated action across finance, sales and operations. Companies that delay modernisation end up financing expansion themselves, tying up liquidity that could otherwise support investment or resilience.
For more advice, speak to our expert credit advisers at Baker Ing.